Nature, Components and Scope of Business

When it comes to the nature and the scope of business, it looks like it is very wide. It covers all the activities related to production and distribution of goods and services from the place productions to the final consumers with an aim to earn profit. There are two types of business activities. These Business Activities also known as business components. These components of business are actually define the scope of business to us. So lets talk about the scope of business organization with the help of these components.

Scope of Business – Components of Business

Industry

The word “Industry” refers to that part of business activities which is apprehensive with the extraction, production or fabrication of products. The products which are raised, produced or processed by an industry may either be used by the ultimate consumer or by another concern for further production. If the goods produced by an industry are consumed by the final customers, these are named as ‘consumer’s goods’ e.g. clothes. If the goods are used for further production of wealth they are called producer’s or capital goods. In case the goods produced by an industry are further processed into finished products by another concern they are called as intermediate goods. i.e Plastic.

Types of Industry:

On the basis activity industry is further classified into various types are as under:-

Extractive Industries

Extractive industries are those industries which extract, raise or fabricate raw materials from above or beneath surface of the earth. i.e. Mining, fisheries forestry, agriculture.

Genetic Industries

Those industries which are engaged in reproducing and multiplying certain species of animals and plants and selling them in the market for profit are named as genetic industries. i.e. Cattle breeding farms, poultry farms, plant nurseries.

Constructive Industries

Constructive industries as the name signifies are engaged in the construction of building, canals, brides, dams, roads etc.

Manufacturing Industries

Manufacturing industries are those which are concerned of converting raw material or semi finished products into finished products. E.g. Shoes Company, Textiles Mills.

Service Industries

Service industries are usually engaged in the manufacturing of intangible goods which cannot be seen or touched by naked eye. The service of professionals such as doctors, lawyers is examples of service industries.

Commerce

The second element that comes in the scope of business is Commerce. It is a very important component of business and is concerned with the buying and selling of goods. It includes all the activities which are connected to the transfer of goods from the place of production to the ultimate consumers. The whole ranges of commerce activities are classified are as under:-

Trade

The process of buying and selling of goods is called Trade. It is the exchange of goods and services among buyers and sellers in which both the parties are benefited. Trade is classified into two types.

Internal Trade

The process of buying and selling of goods within the edge of a country is called internal trade.

1-Wholesale Trade. The process of purchase of goods in huge quantity from producers and their resale to retailers is known as wholesale trade. The retailer then further sells these goods to the final consumers.

2-Retail Trade. The retailer sale the goods and services to the ultimate consumers is known as Retail Trade.

External Trade:

The purchase and sale of goods between two countries are called external trade. It is also called foreign trade. There are two types of external Trade.

Import Trade ii. Export Trade.

Aid to Trade

The activities which help in the purchase of goods and services are called aids to trade. The aids which are compulsory for the development of the trade are as follows:-

Transport

The different ways of transport help in carrying goods from the places of production to centers of utilization e.g. Railways, ships, airlines etc.

Insurance

Insurance is very essential aid to trade. The risk of damage of goods due to fire, flood, earthquake or other causes us covered by insurance.

Warehousing

Warehousing is a kind of storeroom. Nowadays most of the goods are produce in anticipation of demand. They are stored in safe places and are released as and when demanded in the market. Warehousing thus helps in overcoming the barrier of time and creates time utility.

Banking

The commercial banks play a vital role in financing the different trade activities. They are funding the traders for stock holding and transportation of goods. They also support the buyers and sellers of goods in receiving and making payments, both at the national and worldwide level. The credit facility in the form of cash credit, overdrafts and loans is provided to the traders.

Advertisement

Selling of goods is the most difficult problem for the producer. Advertisement regarding the product through newspapers, magazines, radio and television has greatly helped the consumers in choosing the goods of their taste. So advertisements play a vital role in increasing sale of goods.